The EU’s deforestation rule will have an impact on $1.3 billion in Indian exports to the EU, according to GTRI research

The EU’s deforestation rule looks to prioritize safeguarding its own agriculture industry and encouraging exports, making imports more challenging because it is a trade barrier covered up as a green policy, according to the Global Trade Research Initiative (GTRI).

The EU’s recent adoption of deforestation legislation would have an impact on India’s 1.3 billion USD yearly exports of goods to the EU, including coffee, leather skins, and paperboard, according to research by the economic think tank GTRI on Thursday.

The European Union Deforestation-Free Products Regulation (EU-DR) was approved by the European Union Council on May 16—three weeks after the introduction of the carbon border tax.  The EU-DR looks to prioritize safeguarding its own agriculture industry and encouraging exports, making imports more challenging because it is a trade barrier covered up as a green policy, according to the Global Trade Research Initiative (GTRI).

Cattle, buffalo, meat from ruminant animals, preparations, oil cakes, soybeans, palm oil, cocoa powder, chocolate, coffee, leather hides, skins, papers, paperboard, wood, wood products, wood pulp, boards, and wood furniture are all covered by the law.

After December 31, 2020, exporters will have to guarantee that these items were cultivated on land that was not cleared of its trees.  After 18 months for major enterprises and 24 months for small firms, the new regulations will be in effect. As a result, the deadline for large enterprises is December 2024, whereas it is June 2025 for small firms.

“EU DR will adversely affect India’s exports to the EU of the value of US 1.3 billion (2022 data). The significant products affected and their export value to the EU are Coffee (USD 435.4 million), Leather hides, skin, preparations (USD 83.5 million), Oil cake (USD 174.5 million), Paper, paperboard (USD 250.2 million), and Wood furniture (USD 334.6 million),” the report said.

According to the report, the EU accounts for 23.6% of India’s global exports of the products covered by the carbon tax and EU-DR. It also stated that the regulation presents difficulties for small and medium-sized businesses because the costs of compliance and the need for due diligence could prevent them from participating in the global agricultural trade.

“EUDR and the carbon price would both negatively impact the trade in industrial and agricultural goods. Both anticipate soon offering all items. The attack by the EU on commerce is almost total, according to GTRI co-founder Ajay Srivastava.

According to the survey, the European Union (EU) claims it intends to lessen its impact on global deforestation by promoting “deforestation-free” products, but this is perceived as a misleading narrative.  “The EU itself has significantly increased the amount of agricultural land by removing primary forests, which today make up less than 0.7% of its total forest area, compared to the global average of 33.7%. Many other nations have a considerably bigger percentage of the primary forest because they must turn these woods into cultivable land to feed rising populations, it was said.  The EU, however, has already taken this route and is working to stop others from doing the same.

According to the research, by making imports more difficult, the regulation’s implementation would promote local production and export of a few specific agricultural goods.  “The products that the EUDR is focusing on are those that the EU wishes to increase exports while lowering imports of. It said that the EU seeks to further reduce imports through the implementation of the law. “The EU is already competitive in many of these items, as indicated by its worldwide export value of USD 96.2 billion compared to imports of USD 91.9 billion in 2022.

Additionally, it claimed that the agriculture industry in the European Union (EU) is heavily protected and primarily controlled by big international corporations.  Between 2002 and 2022, trade in agricultural goods inside the EU nearly quadrupled, with exports expanding at a faster rate.

“In addition to being seen as discriminatory, the EUDR imposes a significant compliance cost. Even exporters of high-quality products are required to invest in expensive due diligence, making it difficult for small and medium-sized enterprises to comply. This model of global agricultural trade favors large firms,” the report said.